This news release contains forward-looking information that is
based upon assumptions and is subject to risks and uncertainties as
indicated in the cautionary note contained elsewhere in this news
release.
Andrew Peller Limited (TSX:ADW.A)(TSX:ADW.B) (the "Company")
announced today its results for the three and six months ended
September 30, 2011. Effective April 1, 2011 the Company began
reporting its results under International Financial Reporting
Standards ("IFRS"). For more information relating to the impact of
the transition to IFRS on the Company's reported financial
position, financial performance and cash flows, please refer to the
Company's Management Discussion and Analysis ("MD&A") for the
three and six months ended September 30, 2011 available on the
Company's web site or at www.sedar.com.
SIX MONTH HIGHLIGHTS:
-- Sales up 4.4% on solid performance in majority of trade channels
-- Gross margin remains strong due to cost controls and production
efficiencies
-- EBITA up 5.0% to $18.3 million
-- Net earnings up 24.2% to $7.3 million or $0.52 per Class A share
-- Two accretive acquisitions completed subsequent to quarter end
"Our solid growth and strong operating performance continued in
the second quarter as we generated strong volume increases through
the majority of our trade channels," commented John Peller,
President and CEO. "Looking ahead, we believe this organic growth
will continue, augmented by our new strategic partnership with
Wayne Gretzky and the recent accretive acquisition of Cellar Craft,
a leading consumer-made wine business in Western Canada."
Sales for the second quarter of fiscal 2012 rose 1.4% to $70.0
million from $69.0 million in the prior year. For the six months
ended September 30, 2011 sales rose 4.4% to $139.4 million from
$133.5 million in the same period last year. Ongoing initiatives to
grow sales of the Company's blended varietal table and premium
wines through provincial liquor boards, the successful introduction
of new products and solid performance from the Company's estate
wineries and export sales were partially offset by the impact of
the discriminatory levy introduced by the Province of Ontario on
July 1, 2010 on sales of International and Canadian Blended ("ICB")
wines sold through the Company's retail stores and weaker sales of
consumer-made wines. Sales in the first quarter of fiscal 2012 were
positively impacted by the higher volume during the Easter
holiday.
Gross margin was 39.0% of sales for the three months ended
September 30, 2011 compared to 39.2% last year. For the first six
months of fiscal 2012 gross margin was 39.2%, compared to 39.3% in
the same prior-year period. The strengthening of the Canadian
dollar on world currency markets and the Company's successful
efforts to control costs and generate production efficiencies that
served to reduce operating and packaging expenses were offset by
the impact of the above-mentioned discriminatory levy introduced by
the Province of Ontario and higher pricing on wine purchased on
international markets. The impact on EBITA of this levy amounted to
approximately $1.0 million in the first six months of fiscal 2012.
Management remains focused on efforts to enhance production
efficiency and productivity to further improve overall
profitability and to work with the government to eliminate the
discriminatory levy.
Selling and administrative expenses rose in the second quarter
and first six months of fiscal 2012 due primarily to increased
sales and marketing expenses compared with the prior year, as well
as certain one-time costs related to the celebration of the
Company's 50th Anniversary. Despite these increases, selling and
administration expenses were 26.4% of sales during the second
quarter of both fiscal years, and 26.0% in the first six months of
fiscal 2012 compared to 26.3% in the same period last year.
Management expects the level of sales and administrative expenses
will increase slightly in fiscal 2012 due to one-time costs
associated with the Company's 50th Anniversary celebrations.
Interest expense during the second quarter and first six months
of fiscal 2012 declined compared to last year due to a decrease in
short and long-term interest rates.
The Company incurred a non-cash loss in the second quarter of
fiscal 2012 related to mark-to-market adjustments on an interest
rate swap and foreign exchange contracts aggregating $0.1 million
compared to $1.2 million in the prior year. For the first six
months of fiscal 2012 the non-cash loss was $0.4 million compared
to $0.5 million last year. The Company has elected not to apply
hedge accounting and these financial instruments are reflected in
the Company's financial statements at fair value each reporting
period. These instruments are considered to be effective economic
hedges and have enabled management to mitigate the volatility of
changing costs and interest rates.
Other expenses incurred in fiscal 2012 relate to a $0.6 million
fair value adjustment to vines and $0.1 million in ongoing
maintenance related to the Company's Port Moody facility which was
closed effective December 31, 2005. In the first six months of the
prior year, a fair value adjustment to vines of $1.0 million was
recorded, partially offset by other income of $0.3 million related
to a gain on the sale of a portion of an Okanagan vineyard.
Earnings before interest, taxes, amortization, and gains or
losses on the above mentioned derivative financial instruments
("EBITA") were $8.8 million for the three months ended September
30, 2011 and September 30, 2010. For the six months ended September
30, 2011 EBITA was $18.3 million compared to $17.4 million last
year. Net earnings excluding gains (losses) on derivative financial
instruments and other expenses for the three months ended September
30, 2011 were $3.8 million compared to $3.5 million in the prior
year, and $8.1 million for the first six months of fiscal 2012
compared to $6.9 million last year. Net earnings for the second
quarter of fiscal 2012 were $3.4 million or $0.24 per Class A Share
compared to $1.9 million or $0.13 per Class A Share last year. Net
earnings for the six months ended September 30, 2011 were $7.3
million or $0.52 per Class A Share compared to $5.9 million or
$0.41 per Class A Share in the comparable prior year period.
Strong Financial Position
Working capital was $37.1 million at September 30, 2011 compared
to $27.6 million at March 31, 2011. The increase compared to March
31, 2011 was due primarily to increased accounts receivable on
strong sales during fiscal 2012 and a decrease in bank indebtedness
partially offset by a decline in inventories.
The Company's debt to equity ratio was 0.79:1 at September 30,
2011 compared to 0.85:1 at March 31, 2011 and 0.79:1 at September
30, 2010. Shareholders' equity as at September 30, 2011 was $117.7
million or $8.23 per common share compared to $114.3 million or
$7.99 per common share as at March 31, 2011 and $115.5 million or
$7.75 per common share as at September 30, 2010. The increase in
shareholders' equity is primarily due to higher net earnings for
the period. There was also a decline in capital stock and retained
earnings due to the cancellation of 594,412 Class A Shares in the
fourth quarter of fiscal 2011 arising from purchase of shares under
the Company's normal course issuer bid.
Through the first six months of fiscal 2012 the Company
generated cash from operating activities, after changes in non-cash
working capital items, of $10.2 million compared to $16.2 million
in the prior year period. Cash flow from operating activities
declined primarily due to an increase in accounts receivable during
the period partially offset by stronger earnings performance and
lower levels of inventory.
Recent Events
On October 28, 2011 the Company announced the formation of a
strategic alliance with Wayne Gretzky Estate Winery Limited.
On October 28, 2011 the Company completed the purchase of the
inventory and intangible assets of Cellar Craft International, a
consumer made wine business located in Western Canada for
approximately $2.8 million. Cellar Craft is a leader in the
consumer-made wine business utilizing grape skins as well as
juice.
On September 16, 2011 the Company completed a refinancing
package with its existing bank group and entered into a new $125.0
million syndicated loan facility maturing on September 16, 2015.
The operating loan facility in the amount of $75.0 million matures
on September 16, 2015 and bears interest at the one to six-month
Canadian Dealer Offered Rate ("CDOR") plus 1.75%. The term facility
in the amount of $50.0 million matures on September 16, 2015. The
Company maintains an interest rate swap on $45.6 million of the
term facility that effectively fixes the interest rate at 6.19%.
This loan is repayable in monthly principal payments of $0.444
million. The balance of the term facility in the amount of $4.4
million incurs interest at the one-month CDOR plus 1.75% with no
scheduled principal payments.
Financial Highlights (Unaudited)
(Complete consolidated financial statements to follow)
----------------------------------------------------------------------------
(in $000 except as otherwise
stated) Three Months Six Months
----------------------------------------------------------------------------
For the Period Ended September 30, 2011 2010 2011 2010
----------------------------------------------------------------------------
Sales 69,990 69,031 139,397 133,497
Gross margin 27,272 27,038 54,585 52,528
-----------------------------------------
Gross margin (% of sales) 39.0% 39.2% 39.2% 39.3%
-----------------------------------------
Selling and administrative expenses 18,467 18,256 36,298 35,102
Earnings before interest, taxes,
amortization, unrealized gain
(loss) and other expenses 8,805 8,782 18,287 17,426
Unrealized (gain) loss on
derivative financial instruments 113 1,162 413 516
Other expenses 492 1,108 656 859
-----------------------------------------
Net earnings 3,385 1,873 7,296 5,876
-----------------------------------------
Earnings per share - Class A $ 0.24 $ 0.13 $ 0.52 $ 0.41
Earnings per share - Class B $ 0.22 $ 0.11 $ 0.46 $ 0.35
Dividend per share - Class A
(annual) $ 0.360 $ 0.330
Dividend per share - Class B
(annual) $ 0.314 $ 0.288
-----------------------------------------
Cash provided by operations
(after changes in non-cash working
capital items) 11,449 13,582 10,155 16,247
-----------------------------------------
Working capital 37,101 32,822
Shareholders' equity per share $ 8.23 $ 7.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings before other expenses is defined as net earnings
before the net unrealized loss (gain) on financial instruments, and
other expenses, all adjusted by income tax rates as calculated
below:
Unaudited (in $000) Three Months Six Months
----------------------------------------------------------------------------
Period ended September 30, 2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 3,385 1,873 7,296 5,876
----------------------------------------------------------------------------
Unrealized loss on financial
instruments 113 1,162 413 516
----------------------------------------------------------------------------
Other expenses 492 1,108 656 859
----------------------------------------------------------------------------
Income tax effect on the above (164) (613) (289) (371)
----------------------------------------------------------------------------
Net earnings before other expenses 3,826 3,530 8,076 6,880
----------------------------------------------------------------------------
Andrew Peller Limited ('APL' or the 'Company') is a leading
producer and marketer of quality wines in Canada. With wineries in
British Columbia, Ontario, and Nova Scotia, the Company markets
wines produced from grapes grown in Ontario's Niagara Peninsula,
British Columbia's Okanagan and Similkameen Valleys, and from
vineyards around the world. The Company's award-winning premium and
ultra-premium VQA brands include Peller Estates, Trius, Hillebrand,
Thirty Bench, Crush, Sandhill, Calona Vineyards Artist Series, and
Red Rooster. Complementing these premium brands are a number of
popularly priced varietal wine brands including Peller Estates
French Cross in the East, Peller Estates Proprietors Reserve in the
West, Copper Moon, XOXO, and Croc Crossing. Hochtaler, Domaine
D'Or, Schloss Laderheim, Royal, and Sommet are our key value priced
wine blends. The Company imports wines from major wine regions
around the world to blend with domestic wine to craft these
popularly priced and value priced wine brands. With a focus on
serving the needs of all wine consumers, the Company produces and
markets premium personal winemaking products through its
wholly-owned subsidiary, Global Vintners Inc., the recognized
leader in personal winemaking products. Global Vintners distributes
products through over 250 Winexpert and Wine Kitz authorized
retailers and franchisees and more than 600 independent retailers
across Canada, United States, United Kingdom, New Zealand, and
Australia. Global Vintners award-winning premium and ultra-premium
winemaking brands include Selection, Vintners Reserve, Island Mist,
Kenridge, Cheeky Monkey, Ultimate Estate Reserve, Traditional
Vintage, and Artful Winemaker. The Company owns and operates more
than 100 well-positioned independent retail locations in Ontario
under the Vineyards Estate Wines, Aisle 43, and WineCountry
Vintners store names. The Company also owns Grady Wine Marketing
Inc. based in Vancouver, and The Small Winemaker's Collection Inc.
based in Ontario; both of these wine agencies are importers of
premium wines from around the world and are marketing agents for
these fine wines. The Company's products are sold predominantly in
Canada with a focus on export sales for our icewine products.
Andrew Peller Limited common shares trade on the Toronto Stock
Exchange (symbols ADW.A and ADW.B).
The Company utilizes EBITA (defined as earnings before interest,
amortization, unrealized derivative loss (gain) loss, other
expenses, and income taxes). EBITA is not a recognized measure
under IFRS. Management believes that EBITA is a useful supplemental
measure to net earnings, as it provides readers with an indication
of cash available for investment prior to debt service, capital
expenditures and income taxes. Readers are cautioned that EBITA
should not be construed as an alternative to net earnings
determined in accordance with IFRS as an indicator of the Company's
performance or to cash flows from operating, investing and
financing activities as a measure of liquidity and cash flows. The
Company also utilizes gross margin (defined as sales less cost of
goods sold, excluding amortization). The Company's method of
calculating EBITA and gross margin may differ from the methods used
by other companies and, accordingly, may not be comparable to
measures used by other companies.
Andrew Peller Limited common shares trade on the Toronto Stock
Exchange (symbols ADW.A and ADW.B).
FORWARD-LOOKING INFORMATION
Certain statements in this news release may contain
"forward-looking statements" within the meaning of applicable
securities laws, including the "safe harbour provision" of the
Securities Act (Ontario) with respect to Andrew Peller Limited (
the "Company") and its subsidiaries. Such statements include, but
are not limited to, statements about the growth of the business in
light of the Company's recent acquisitions; its launch of new
premium wines; sales trends in foreign markets; its supply of
domestically grown grapes; and current economic conditions. These
statements are subject to certain risks, assumptions, and
uncertainties that could cause actual results to differ materially
from those included in the forward-looking statements. The words
"believe", "plan", "intend", "estimate", "expect" or "anticipate"
and similar expressions, as well as future or conditional verbs
such as "will", "should", "would", and "could" often identify
forward-looking statements. We have based these forward-looking
statements on our current views with respect to future events and
financial performance. With respect to forward-looking statements
contained in this news release, the Company has made assumptions
and applied certain factors regarding, among other things: future
grape, glass bottle and wine prices; its ability to obtain grapes,
imported wine, glass, and its ability to obtain other raw
materials; fluctuations in the U.S./Canadian dollar exchange rates;
its ability to market products successfully to its anticipated
customers; the trade balance within the domestic Canadian wine
market; market trends; reliance on key personnel; protection of its
intellectual property rights; the economic environment; the
regulatory requirements regarding producing, marketing,
advertising, and labelling its products; the regulation of liquor
distribution and retailing in Ontario; and the impact of increasing
competition.
These forward-looking statements are also subject to the risks
and uncertainties discussed in this news release, in the "Risk
Factors" section and elsewhere in the Company's MD&A and other
risks detailed from time to time in the publicly filed disclosure
documents of Andrew Peller Limited which are available at
www.sedar.com. Forward-looking statements are not guarantees of
future performance and involve risks, uncertainties, and
assumptions which could cause actual results to differ materially
from those conclusions, forecasts, or projections anticipated in
these forward-looking statements. Because of these risks,
uncertainties and assumptions, you should not place undue reliance
on these forward-looking statements. The Company's forward-looking
statements are made only as of the date of this news release, and
except as required by applicable law, the Company undertakes no
obligation to update or revise these forward-looking statements to
reflect new information, future events or circumstances or
otherwise.
ANDREW PELLER LIMITED
Consolidated Balance Sheets
Unaudited
These financial statements have not been
reviewed by our auditors September 30 March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2011 2011
(in thousands of Canadian dollars) $ $
----------------------------------------------------------------------------
Assets
Current Assets
Accounts receivable 27,926 23,390
Inventories 88,578 94,692
Current portion of biological assets 2,664 759
Prepaid expenses and other assets 2,378 818
-----------------------------
121,546 119,659
Property, plant and equipment 84,075 84,744
Biological assets 11,993 11,950
Intangibles and other assets 12,874 14,170
Goodwill 37,473 37,473
-----------------------------
267,961 267,996
-----------------------------
-----------------------------
Liabilities
Current Liabilities
Bank indebtedness 43,867 48,758
Accounts payable and accrued liabilities 32,554 33,883
Dividends payable 1,252 1,148
Income taxes payable 57 1,000
Current portion of derivative financial
instruments 1,349 1,894
Current portion of long-term debt 5,366 5,333
-----------------------------
84,445 92,016
Long-term debt 44,267 42,720
Long-term derivative financial instruments 2,917 1,578
Employee future benefits 7,092 5,565
Deferred income taxes 11,526 11,820
-----------------------------
150,247 153,699
-----------------------------
Shareholders' Equity
Capital stock 7,026 7,026
Retained earnings 110,688 107,271
-----------------------------
117,714 114,297
-----------------------------
267,961 267,996
-----------------------------
-----------------------------
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes. They
will be available through the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Consolidated Statements of Earnings
Unaudited
These financial statements have not been reviewed by our auditors
For the three For the six months
months ended ended
September 30 September 30
2011 2010 2011 2010
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Sales 69,990 69,031 139,397 133,497
Cost of goods sold, excluding
amortization 42,718 41,993 84,812 80,969
---------------------------------------
27,272 27,038 54,585 52,528
Selling and administration 18,467 18,256 36,298 35,102
---------------------------------------
Earnings before interest and
amortization 8,805 8,782 18,287 17,426
Interest 1,482 1,885 3,031 3,827
Amortization of plant, equipment and
intangibles 1,928 1,876 3,875 3,758
---------------------------------------
Earnings before other items 5,395 5,021 11,381 9,841
Net unrealized losses on derivative
financial instruments 113 1,162 413 516
Other expenses 492 1,108 656 859
---------------------------------------
Earnings before income taxes 4,790 2,751 10,312 8,466
---------------------------------------
Provision for income taxes
Current 1,311 1,531 2,827 3,084
Deferred 94 (653) 189 (494)
---------------------------------------
1,405 878 3,016 2,590
---------------------------------------
Net earnings for the period 3,385 1,873 7,296 5,876
Net earnings per share
Basic and diluted
Class A shares 0.24 0.13 0.52 0.41
---------------------------------------
---------------------------------------
Class B shares 0.22 0.11 0.46 0.35
---------------------------------------
---------------------------------------
The above statements should be read in conjunction with the entire interim
consolidated financial statements and notes.
They will be available through the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Consolidated Statements of Comprehensive Income
Unaudited
These financial statements have not been reviewed by our auditors
For the three For the six months
months ended ended
September 30 September 30
2011 2010 2011 2010
(in thousands of Canadian dollars) $ $ $ $
----------------------------------------------------------------------------
Net earnings for the period 3,385 1,873 7,296 5,876
Other comprehensive income (loss)
Net actuarial losses on employee
future benefits (1,531) (1,303) (1,857) (2,269)
Deferred income taxes 398 339 483 590
---------------------------------------
(1,133) (964) (1,374) (1,679)
---------------------------------------
Net comprehensive income 2,252 909 5,922 4,197
---------------------------------------
---------------------------------------
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes. They
will be available through the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
ANDREW PELLER LIMITED
Consolidated Statements of Cash Flows
Unaudited For the For the
These financial statements have not been six months six months
reviewed by our auditors ended ended
------------------------------------------------------------------------
------------------------------------------------------------------------
September September
30, 2011 30, 2010
(in thousands of Canadian dollars) $ $
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 7,296 5,876
Items not affecting cash:
Loss (gain) on disposal of property, plant
and equipment 110 (304)
Amortization of plant, equipment and
intangibles 3,875 3,758
Revaluation of vine biological assets net of
insurance recovery 556 804
Employee future benefits (330) (214)
Net unrealized (gain) loss on derivative
financial instruments 413 516
Deferred income taxes 189 (494)
Amortization of deferred financing costs 224 369
--------------------------
12,333 10,311
Changes in non-cash working capital items
related to operations (2,178) 5,936
--------------------------
10,155 16,247
--------------------------
Investing activities
Proceeds of disposal of property, plant,
equipment and vine biological assets - 766
Purchase of property, equipment and vine
biological assets (3,591) (2,910)
Purchases of other assets (28) (72)
Acquisition of businesses (600) (825)
--------------------------
(4,219) (3,041)
--------------------------
Financing activities
Deferred financing costs (629) -
Increase (decrease) in bank indebtedness (4,891) (8,146)
Increase in long-term debt 50,263 -
Repayment of long-term debt (48,278) (2,666)
Dividends paid (2,401) (2,394)
--------------------------
(5,936) (13,206)
--------------------------
Increase (decrease) in cash during the period - -
Cash, beginning of period - -
Cash, end of period - -
--------------------------
--------------------------
Supplemental disclosure of cash flow
information
Cash paid during the period for
Interest 2,962 3,845
Income taxes 3,770 2,080
The above statements should be read in conjunction with the
entire interim consolidated financial statements and notes. They
will be available through the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
Contacts: Andrew Peller Limited Mr. Peter Patchet CFO and EVP
Human Resources (905) 643-4131 Ext.
2210peter.patchet@andrewpeller.com
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